U.S. health reform now needs reforming

Health care comprises almost 18 percent of the United States’ gross domestic product — a figure touted by the industry as testament to its importance to society and contribution to our standard of living. But this statistic paints a rosy picture and hides a bitter truth. The health-care industry is a service industry. Less, not more, is better. Let’s do some calculations.

It is no wonder that in a recent blog David Chase postulated that health-care costs have caused the fall of the middle class, as employers have paid for increasing health costs as opposed to increasing salaries.

And it is getting worse. This year, health insurance companies are requesting premium increases ranging from 34 to 60 percent in Texas, Oklahoma and Missouri, justified by these carriers losing money in the Affordable Care Act insurance exchanges.

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Even California, which historically has low yearly increases, approved an average increase of 13.2 percent. Avalere Health surveyed insurance companies in 14 additional states across the nation and found the average Silver Plan to increase by 11 percent.

Why is this happening?

▪ Mega mergers of insurance companies are of concern. The U.S. Justice Department is suing to block the mergers of Aetna and Humana and Anthem and Cigna based upon fears of driving up the costs to policyholders. But why the concern? Doesn’t the ACA fix the medical loss ratio by mandating that 80 to 85 percent of the premium be spent on the policyholder’s health care?

▪ Yes, but the restriction on profits to a percent of the premium transforms insurance companies’ historic incentive to buy affordable health care into an incentive to buy more expensive health care and then raise premiums. The dollar amount of profit can then increase. And forget about pre-certification for the prevention of unnecessary tests.

What insurance company is going to take the legal risk of implementing such a program, when if it is highly successful, the ACA mandates that rebate checks be sent to its policyholders so the company does not violate the medical loss ratio restrictions?

All of this will only happen in a highly mature market with little competition. Unfortunately, too many areas of the nation fit this description and mergers will only make matters worse.

▪ Mega mergers of hospital systems with the massive employment of doctors are of equal concern. This integration was supposed to allow efficient health care and savings to patients. But instead it is being used to satiate health-care industries’ hunger for ever increasing profits. At the same time staff are being cut around the nation because funds are not available,CEO and executive salaries are rapidly increasing to record levels

▪ One of the most glaring examples of the greed in this broken system has been the acquisition of physician practices by hospitals and then effectively doubling the charges for the same service by charging a facility fee.

This is taking advantage of a legal loophole at the expense of patients. The federal government recently closed this loophole by barring this practice in off-hospital campus facilities. However, current facilities were grandfathered in; with the massive employment of physicians which has already taken place, I’m afraid this action is too little too late.

Why is all of this happening with largely non-profit delivery systems? One needs to remember that even non-profits are largely profit driven. The short answer as to why facilities are charging more for services, is because they can.

The Affordable Care Act is at risk of becoming anything but affordable. Its name should be changed to the Accountable Care Act, since the ACA has good provisions which promote health-care transparency and quality. But as it stands, our health-care delivery system is again in desperate need of reform.